UPDATE: Iraqi Gas From Pearl May Supply Nabucco By 2014 -OMV

Northern Iraqi gas production from the Pearl Production Co. could be available in five years to feed into the Nabucco gas pipeline and supply Europe, Austrian oil company OMV AG (OMV.VI) said Friday.

"Pearl is very important because they have access to a major gas field. It has the capacity to produce an important part of the supply of Nabucco," said the company's Chief Executive Wolfgang Ruttenstorfer at a press briefing in London. "The gas is there and could be available in five years."

OMV owns a 10% stake in Pearl.

The 3,300 kilometer Nabucco pipeline is an ambitious project that aims to open a new supply route for Central Asian and Middle Eastern gas to Europe via Turkey, Bulgaria, Romania, Hungary and Austria. The project has the backing of the European Union, which sees it as a way to reduce dependency on imports of Russian natural gas.

OMV, Germany's RWE AG (RWE.XE), Turkey's Botas, Bulgarian Energy Holding, Romania's Transgaz and Hungary's MOL Nyrt. (MOL.BU) are members of the Nabucco consortium. They plan to decide whether to proceed with the project in the fourth quarter of 2010, with operation due to commence in 2014.

Gas fields in northern Iraq could be developed in several years and linked fairly quickly to Turkey through an inexpensive feeder pipeline, Ruttenstorfer said. He added that he is confident that political tensions over energy exports from the Kurdish region of Iraq will have been resolved within the time frame of the Nabucco project.

The economic downturn that has left Europe with a surplus of gas has not fundamentally changed the viability of Nabucco, said Ruttenstorfer. "We are going to have an oversupply of gas in Europe for the next three to five years," he said, but after that the region will see its need for gas imports rising again.

The downturn has also had little impact on the projected EUR7.9 billion cost of the pipeline, said Ruttenstorfer.

Partners in the Nabucco consortium will need to secure around half of the pipelines planned 31 billion cubic meter a year capacity in order for the project to get the go-ahead as scheduled for the fourth quarter of 2010.

In addition to Iraq, around half this gas will probably have to come from Azerbaijan, so the decision from BP PLC (BP), Azeri state oil company Socar and their partners on whether to proceed with the second phase of the Shah Deniz gas project will be crucial, Ruttenstorfer said.

Many Nabucco consortium members are talking to the Azeris about gas supply, he said.

-By Lananh Nguyen and James Herron, Dow Jones Newswires; [phone]; [e-mail]